Providing perspective on the economics and politics of sports business in Florida...and the Rays' campaign for a new stadium in Tampa Bay.

Saturday, June 25, 2016

Teams Will Say Anything to Keep Subsidy Spigot Running

I haven't had much time to blog lately - partially due to speaking at the annual IRE (Investigative Reporters & Editors) convention about the importance of watchdog journalism in sports business.

I pushed journalists around the county to go investigate their own local stadium subsidies; to scrutinize economic impact claims; and to hold elected officials accountable.

We also talked about how the real value of new stadiums is not in more seats or luxury boxes anymore - in fact, Hillsborough Commissioner Ken Hagan recently said a new Rays park may have zero suites. But instead, the real value of new stadiums lies in 1) increasing demand for teams' product and 2) other real estate/ancillary deals around the park.

Also worth reading this weekend - the Tampa Bay Times' synopsis of how stadiums "aren't built the way they used to." Kidding, they're built better. But as I wrote a few years ago, 20 is the new 40 for stadiums and teams seem to have little interest in honoring the spirit of their original 30-year leases:

What's worrisome is that baseball teams seem to be accelerating their demands for new stadiums, effectively shortening the lifespans of pricey stadiums to mere decades. Consider this a sports version of the old Space Race when the United States and Russia went wild with checkbooks trying to establish dominance above Planet Earth.

It's beyond worrisome. And an important question worth asking of Ken Hagan, Bob Buckhorn, Rick Kriseman, and other politicians talking to the Rays: how do you expect to ensure the Rays would return 30 years of investment to the people who pay hundreds of millions of dollars for their new home?

22 comments:

Please keep fighting the good fight. Here is an email I sent to Carson Cooper of WUSF/NPR regarding his interview of 6/2/2016 with Brian Auld. Carson has not responded. The media folks need to change the narrative from "how much should the public pay for a new stadium?" to "why should the public pay a dime for a new stadium?".==============================================Hi Carson,

Thanks for your interview with Brian Auld that I heard last night - 6/21/2016 - on WUSF Radio.

Regarding funding for a new stadium for the Rays, it is really depressing for us taxpayers to hear the media folks accepting, without challenge, that we have to help pay for the stadium. How about we consider the reality that MLB/Rays need not a dime of public money for anything.

MLB and the Rays can easily afford to pay 100% of the $600 million or so for a new stadium in Tampa Bay.

Per http://www.statista.com/statistics/193466/total-league-revenue-of-the-mlb-since-2005/ in 2001 total MLB revenues were $3.58 billion ($4.8 billion in 2015 dollars) and 56% of those revenues went to players’ salaries.

In 2015, total MLB revenues were $8.39 billion and just 45% went to players’ salaries, even with the many ridiculously stupid long-term contracts that are negotiated, and you can now add the recent new contracts of David Price, Zack Greinke, Jeff Samardzija, Max Scherzer, Jon Lester, Elvis Andrus, Kyle Seager, Jordan Zimmerman, Jason Heyward, Justin Upton, Johnny Cueto, Giancarlo Stanton, and Chris Davis, and Stephen Strasburg to the list.

So revenues (in 2015 dollars) after deducting for player salaries were $2.1 billion in 2001 and $4.6 billion in 2014. That is an increase of $2.5 billion which averages out to $83 million per team. To build a $600 million stadium costs just $34 million per year assuming 4%/30 year terms.

What have MLB and MLB owners done with all this extra money? Keep in mind that their slice of this ever growing pie will continue to get bigger in the coming years.

During the Bud STEALig era (1992-2014), 21 new MLB stadiums were built, 20 of which received substantial public funding. Not only did 20 MLB clubs get lots of public money, not even one of them opened their books to show why they needed public money!

For taxpayers to pony up even a dime for a new stadium for any team is obscene. That is like providing publicly funded college scholarships for Warren Buffet’s and Bill Gates’ kids.

Please change the narrative from how much will taxpayers pay for the new stadium to why should the taxpayers have to pay anything for a new stadium?

In any investment scenario, all sources of revenues must be considered in order to better understand the value and the benefits of such investments (public and private).

Over the last few years, I read a lot of arguments (pro and cons) but rarely I read an objective economical analysis of the situation (keeping the Rays or not) and behind the project of building a new stadium in Tampa Bay.

What are the real numbers behind the stadium project and the Rays contribution to the Tampa Bay economy?

1. Income tax paid by Rays players2. Income tax paid by Rays personnels and employees3. Income tax paid by visiting team players during the season4. Tax paid on products or services by fans during a season5. Economic impact of tourists that are coming to the games6. Economic impact of Rays employees7. Tax paid by workers on a new stadium project8. Other economical impact of building a new stadium and keeping the Rays.

Now, the second element to consider is the opportunity cost. Without the Rays (and a stadium project), what are the economical impacts of other projects (because without the Rays, something else will happen on the potential stadium sites).

In Montreal, we did such analysis and we have reliable numbers that details the economical impacts. We already know that (in CAD):

- Building a new stadium will generate ~$106.9M to the Federal and Provincial governments in taxes.- Operating the stadium will generate ~$37.9M/yearly to the Federal and Provincial governments in taxes.- Impact on tourism will generate ~$12.7M/yearly- Income tax on players salary will generate ~$37.8M/yearly to the Federal and Provincial governments in taxes.

So bottom line, governments will get ~$88.4M per year in taxes without investing money into the project. And I don’t consider all the impacts in that summary, city taxes are not factored as well as other indirect impacts on the economy.

Knowing that, we can then evaluate if the level of public funding make sense or not in such project.

@Pat - there's no land available that will work for the Rays. And the only public financing they may have is for the Trop site - which they said is not suitable to begin with. Bottom line is with very few fans, gov't taxes from spend will be low... this looks to be a bust of an investment.. a la marlins

What are the real numbers behind the stadium project and the Rays contribution to the Tampa Bay economy?

1. Income tax paid by Rays playersANSWER: 0 as Florida has no state income tax and Tampa Bay has no local income tax

2. Income tax paid by Rays personnels and employeesANSWER: 0 as Florida has no state income tax and Tampa Bay has no local income tax

3. Income tax paid by visiting team players during the seasonANSWER: 0 as Florida has no state income tax and Tampa Bay has no local income tax

4. Tax paid on products or services by fans during a seasonANSWER: About the same as the tax fans would pay if they spent their money elsewhere locally

5. Economic impact of tourists that are coming to the gamesANSWER: Probably slightly more than the offsetting economic impact of Rays fans traveling to other cities for games

6. Economic impact of Rays employeesANSWER: Beyond the players, front office, and coaching staff, most Rays employees are not well paid. The economic impact would be minimal.

7. Tax paid by workers on a new stadium projectANSWER: What tax are you talking about?

8. Other economical impact of building a new stadium and keeping the Rays.ANSWER: Who knows? What is known is that if, say, $200 million of public money could be spent on other than the new stadium, it could have much greater positive impact – for example - $200 million to fund college scholarships for ‘at risk’ students.

This is why the public funding debate is completely different in Montreal, Quebec city (and anywhere else in Canada) compared to Tampa Bay or probably in Florida State.

When governments are collecting lots of money upfront (to fund health care system & education that represent 75% of all government expenses in Quebec), requests for public funding tend to be higher in such case because governments are collecting taxes anyway. That have a 100% probability to collect taxes that are predictable.

I fully understand why in Florida, public funding is a big issue for professional sports facilities considering that the TB community does not collect as much as what Canadian communities are collecting for the same project/initiative.

That does not allow Canadian communities to blindly fund with public money such projects, of course. But it explain why the dynamic between governments and privates companies is way different up North. The requests from private companies are always tied to the fact that governments are getting a guaranteed share of the investments and recurring revenues.

...about the importance of w̶a̶t̶c̶h̶d̶o̶g̶ copycat journalism in sports business.A "deep thought" is why ALL of these cities through the century is willing to invest in sports stadiums, just to lose $, think not?Either or, there's a decent chance Tampa Bay gets hit hard by a hurricane or has to start dealing with rising seas within that 30 yr window, so what's the real story?

Apart from all of the benefits for cities to be home to sport stadium(s), especially ones in regions with nice weather that attract bigger annual events, game tickets are to expensive...Now, I see the value in spending $10 for a scalped ticket for hours of world class entertainment, then sit in better seats, but that only works in some stadiums, like here. The average cost for tickets is around $80 for an NFL game & $40 for the other big 3, with about 1/4 being double the average, add the cost for additional tickets, parking, food & drinks, game gear, etc., it can be an expensive outing...The anger in sports greed shouldn't be in cities willing to partner with big businesses for the benefit of revenues both directly & indirectly, it should be in the cost of playing the game. And, there isn't a direct relation between new stadiums and base ticket prices, new stadiums are designed to target the willing wealthier...The reality is that stadiums are a big benefit for cities, but being that the cost of building a stadium is mostly in construction & planning, I believe the real beef should be in the pay for players! I understand your worth what someone is willing to pay you, but why not lower the caps, pass the savings in tickets, and draw bigger crowds to stadiums, which draws bigger crowds spending in cities? Because when tickets are free or $5 like the Orlando night, the Trop is packed, but when Longo isn't in the line-up which gets about 70k a game (which is cheap for star players), 35k seats, should they give a $2 discount that would help sell more tickets?

It was an analogy to make a point, like if Teixeira & CC isn't expected to play, at a cost of about $8 a seat, should their $20 ticket be $12?Besides, I forgot better stuff then you ever thought of Anony, "that's sad"...

There' a big difference between net worth & a pay check (or regular revenue), meaning there's a difference between what owners collect in profits & buying a stadium. Plus, city's like to have control with investments in big stadiums on THEIR land...Though I guess what's bad for owners is bad for local governments...

I understand this blog is designed to try to exploit any negative angles of sports stadiums, and ignore all the positives, and nothing more.Though the greed is by the leagues, and not by the cities & owners that become invested into these businesses.Like scenarios I stated above, I think a great one is what if Rodger Goodell earned $1 million opposed to about $31 mill, took the other $30+ mill. and discounted all the tickets of the 17 million attended, give or take a few mill, and we're talking a $2 discount, not much, but it's a start.Again, it isn't the revenue generated from stadiums or the "tax payers", it's the fans cost of being a part of the game that's the real "field of schemes"...

Wow, how about the shadows of NBA arenas where the average single ticket is up around $50, and bench players are getting paid more then anyone in attendance!Oh, I forgot, this blog is only about how stadiums increase the values of taxpayer's places...